See inside Ford’s new tech campus, a century-old Detroit train station restored for $950 million

Ford Motor is turning an abandoned train station used for decades as an infamous symbol of Detroit’s downfall and blight into a new technology campus for the automaker and mixed-use property for the city.

Michael Wayland / CNBC

DETROIT – Ford’s latest project out of the Motor City is the restoration and reopening of an abandoned train station, for decades a symbol of Detroit’s downfall and now the automaker’s new technology campus.

The $950 million project encompasses the 18-story former train station called Michigan Central Station – once the state’s marquee transit building – an adjacent 270,000-square-foot building and other, supporting facilities.

The 30-acre “Michigan Central” campus and station was initially announced in 2018 and slated to open by 2022. However, the coronavirus pandemic and the extensive work needed to renovate the station delayed its reopening. Ford is celebrating the restoration of the century-old train station on Thursday.

Following the event Thursday, the ground floor of the train station building will be open to the public through June 16, before the first commercial occupants begin moving in this fall.

The new campus comes at a precarious time for Ford investors as the company continues to restructure its business. It also comes as many companies attempt to downsize office space and fill their current buildings with employees who grew accustomed to working from home during the pandemic.

A photo of Michigan Central’s main concourse prior to its renovation sits in the newly restored room toward the back of the building.

Michael Wayland / CNBC

Specifically in Detroit, a stark juxtaposition has emerged: In April, Ford’s crosstown rival General Motors announced it would be downsizing from its towering Renaissance Center headquarters along the city’s riverfront to two floors in a nearby building that’s under construction.

Yet Ford Chair Bill Ford said he believes the investment made in the historic train station is a crucial part of the automaker’s future, including in aspects of talent acquisition and retention.

“We’re in a war for talent, our industry and our company,” Ford, who spearheaded the project, told CNBC. “And you need to give talent two things: You need to give them, first, really interesting problems to solve, and then you have to give them a great place to work. With Michigan Central, we checked both those boxes.”

Bill Ford decided to purchase the dilapidated building after years of trips to Silicon Valley for his Fontinalis venture capital firm and during his tenure as a member of the eBay board of directors. He’s long been outspoken about the need for the traditional automotive industry to compete with newer tech companies in both product and talent acquisition.

Ford Motor released this image of Chair Bill Ford, great-grandson of company founder Henry Ford, when the automaker announced it would be purchasing Michigan Central Station in June 2018.

Ford

Ford said attracting top talent to Detroit is “getting better” but noted that “it’s a tall order” to convince workers from California or the East Coast to relocate to Detroit and work for Ford.

“If you can show them a place like Michigan Central, not just in its beauty, which alone is incredible, but then talk about the kind of things that will be going on there, then it becomes, I think, a really valuable resource for the company going forward,” he said.

Train station campus

The Michigan Central campus is located southwest of Detroit’s main business district in a trendy neighborhood known as Corktown. It’s about 10 miles down the road from Ford’s world headquarters in Dearborn, Michigan.

The Michigan Central campus in total spans 1.2 million square feet of commercial space, including retail, restaurants and hospitality. It was awarded $300 million in state, local and historic rehabilitation tax incentives, according to officials.

The restored grand waiting room inside Ford’s Michigan Central Station in Detroit.

Michael Wayland / CNBC

Ford officials went to great lengths to restore the station to its original glory after decades of vandalism and decay. The project involved 3D-scanning the rooms, matching materials and referencing historical photos to recreate parts of the building.

This was especially true for the first floor of the train station, where a grand room features massive windows, an arcade and a large concourse full of marble and terrazzo flooring, Mankato stone and other unique materials.

Architects and designers opted to leave some graffiti on walls to represent the station’s dormant years after closing in 1988.

As one measure of Ford’s determination, officials traced the facility’s original limestone to a quarry in Indiana only to find out it had since closed. Michigan Central worked with the owners to reopen the quarry.

Some graffiti from when Michigan Central sat dormant for more than 30 years was purposely preserved to represent that part of the station’s history.

Michael Wayland / CNBC

“It has been painstakingly and lovingly restored to, wherever possible, to its original condition,” said Josh Sirefman, Michigan Central CEO, during a tour of the project. “Before we start activating it with lots of things, it’s probably in its most pristine condition.”

Amid national commercial real estate challenges, about two-thirds of the tower has scheduled tenants or planned use cases, officials said. That includes an unnamed restaurant and hotel, pending rezoning approval.

The adjacent building, known as the Detroit Public Schools Book Depository, already houses more than 600 employees from nearly 100 startup companies.

“It really is the beginning of the ecosystem that I want to create,” Bill Ford said. “There’s going to be a lot of experimentation taking place down there.”

Ford plans to house at least 2,500 employees in the building, primarily members of the company’s electric vehicle and connected services teams. Roughly 1,000 of those employees are expected to move into the station’s tower by the end of this year, Ford said.

Other building occupants could include local universities, other businesses and a restaurant. However, officials declined to release a full list of expected tenants. Google, a founding partner of the project, runs its “Code Next” program, which teaches students how to code, from the Book Depository building.

Ford said he expects future automaker employees to be able to collaborate with other occupants of the station’s tower as well as the startups occupying the Book Depository building.  

A photo of Michigan Central’s arcade prior to its renovation sits in the newly restored room toward the east end of the building.

Michael Wayland / CNBC

‘Legacy project’

Resurrecting the train station and surrounding campus is the latest project Bill Ford, a great-grandson of company founder Henry Ford, has undertaken in the Motor City.

He was instrumental in moving the Ford family-owned Detroit Lions from suburban Pontiac to a new stadium, appropriately named Ford Field, in downtown Detroit in 2002. He also was part of the team that brought the Super Bowl to the city in 2006.

And he redeveloped the company’s River Rouge Assembly plant into a “green” production facility amid calls to close it. It’s now a tourist destination for the production of the Ford F-150 full-size pickup.

Ford, who served as CEO of the automaker from 2001 to 2006, described Michigan Central as a continuation of such projects. He called the effort a “legacy project” for himself as well as for those who have been able to work on it.

“I’m very proud of both of those [prior projects], but I think this is going to kind of put an exclamation point on it because this will be a wonderful place to work but it will also be a wonderful place for the public to come,” Ford said.

The renovated “reading room” off of the grand waiting room at Ford’s Michigan Central Station in Detroit.

Michael Waylans / CNBC

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Jeep reveals all-electric Wagoneer S in EV offensive, starting at $72,000

2024 Jeep Wagoneer S EV

Jeep

NEW YORK – The first all-electric Jeep SUV for the U.S. will be the 2024 Wagoneer S, starting at about $72,000 when it’s scheduled to go on sale this fall.

The Stellantis-owned brand revealed the vehicle and pricing Thursday, portraying it as a “new chapter” for the quintessential American SUV brand that has struggled with domestic sales in recent years.

“This represents a lot. It is the first global [all-electric vehicle] built in North America, designed in the U.S. … for the world,” Jeep CEO Antonio Filosa told CNBC during an interview after revealing the vehicle. “It is a milestone in our history.”

Filosa, who started leading Jeep in December, said the brand is in “fantastic shape” but it’s in the midst of a “transition like all the automotive brands nowadays” involving electrification.

Despite a slower than expected adoption of EVs in the U.S., Filosa said the brand is not worried about consumer adoption because its additive to the Jeep’s lineup, which will continue to offer traditional gas-powered SUVs, plug-in hybrid electric vehicles and “extended-range” electric vehicles starting next year.

Jeep Wagoneer S EV concept

Michael Wayland / CNBC

A “Launch Edition” of the Wagoneer S will initially be available with a 400-volt, 100-kilowatt-hour battery pack capable of more than 300 miles on a single charge, 600 horsepower and 617 pound-feet of torque for a 0-60 mph acceleration of 3.4 seconds. It is capable of charging from 20%-80% in 23 minutes using a DC Fast charger, according to the company.

Jeep also revealed a Trailhawk off-road performance concept of the EV, which Filosa said “hopefully soon will become a product.”

Filosa said less expensive models of the Wagoneer S will start being released roughly six months after the Launch Edition.

The $71,995 starting price of the Wagoneer S EV sits between gas-powered versions of the Wagoneer, starting at about $63,000, and more luxurious Grand Wagoneer, starting at roughly $92,000.

Jeep also will introduce a new unnamed midsize SUV next year to replace its discontinued Cherokee, Filosa said.

2024 Jeep Wagoneer S EV

Jeep

He also said the company will release electric, extended-range versions of the traditional gas-powered Wagoneer and Grand Wagoneer in 2025. The technology, which uses an engine as a gas-powered generator in addition to EV batteries, is expected to debut on the upcoming Ram Ramcharger pickup truck.

U.S. EV offensive

The Wagoneer S is the beginning of what Stellantis CEO Carlos Tavares this week called the automaker’s EV offensive for the U.S., including six to eight all-electric vehicles this year.

“There is a huge amount of opportunities here in the U.S. We are just starting the offensive of our electrification,” Tavares said Wednesday during a Bernstein investor conference.

For Jeep, the Wagoneer S is expected to be followed by a Wrangler-inspired off-road vehicle called the Recon later this year and a new roughly $25,000 EV “very soon,” Tavares said Wednesday without disclosing additional details.

Stellantis CEO Carlos Tavares holds a news conference after meeting with unions, in Turin, Italy, March 31, 2022.

Massimo Pinca | Reuters

For years, Tavares has been outspoken about the company being forced to produce EVs, which cost 40% more, due to regulatory requirements and not consumer demand. On Wednesday, he described EVs as a “cost-cutting exercise” to ensure the vehicles are profitable.

The EVs are a shift for Jeep in the U.S., where the brand has been focusing on plug-in hybrid electric vehicles, or PHEVs, such as its Wrangler and Grand Cherokee SUVs. The plug-in vehicles accounted for 17.5% of Jeep’s sales this year.

Filosa said Jeep, which is currently No. 1 in PHEVs in the U.S., expects to continue growing sales of those vehicles in addition to the upcoming EVs.

“Electrification to us so far has been working very, very well. Basically,” he said during the reveal event, “we built the PHEV industry. We own this part of the market.

 Jeep Wagoneer S Trailhawk EV concept

Michael Wayland / CNBC

Stellantis’ total PHEV U.S. sales last year was nearly 143,000, up 124% compared to 2022. Leading the way was Jeep, including 67,429 Jeep Wrangler and 45,684 Jeep Grand Cherokee “4xe” SUVs.

Jeep is using 4xe badging as a play on the brand’s off-road reputation combined with electrification, including EVs and PHEVs.

Wagoneer S

2024 Jeep Wagoneer S EV “R-Wing”

Jeep

Despite sharing the “Wagoneer” name with Jeep’s current gas-powered model, the five-passenger, two-row EV shares little with its three-row traditional internal combustion engine counterpart other than some Jeep styling.

The most notable difference on the exterior is a more modern interpretation of the brand’s iconic seven-slotted grille, which the EV doesn’t actually need for cooling. It’s indented and the slots are solid and interconnected with one another compared to seven separate slots.

“We reinvented the traditional seven-slot grille,” said Ralph Gilles, Stellantis head of design. “I am so damn proud of this.”

The Wagoneer S also features a large “R-Wing,” an open spoiler on the back of the SUV. Gilles said the goal was to not make a “jellybean” like many EVs with good aerodynamics currently being sold in the U.S.

The Wagoneer S is far less boxy that the gasoline model, assisting in it in being the most aerodynamic Jeep ever produced by the brand, the company said.

Stellantis design chief Ralph Gilles during the unveiling of the Jeep Wagoneer S EV on May 30, 2024 in New York City.

Michael Wayland / CNBC

Gilles said the Wagoneer name is more representative of the luxuriousness of the vehicle rather than a singular design.

Inside the vehicle more than 45 inches of screens, including a 12.3-inch center display, and a mix of metal, fake leather and other sustainable materials.

Gilles, a longtime renowned car designer with the company, said wood was banned from the interior of the vehicle. It also doesn’t feature any chrome on the exterior of the SUV. Those decisions were made following input from younger designers to make the vehicle more sustainable and attractive for more youthful buyers.

“If this is going to be a green vehicle, we had to rethink the materials inside,” Gilles said. “There was a huge push for sustainable materials everywhere.”

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GM all-electric Chevy Equinox goes on sale as the latest test for EV production and demand

GM’s 2024 Chevrolet Equinox EV during a media launch event for the vehicle on May 16, 2024 in Detroit.

Michael Wayland / CNBC

DETROIT — The Chevrolet Equinox has been a crucial part of General Motors’ lineup for two decades. The vehicle is a quintessential family hauler and a go-to car for people seeking an economical compact crossover for everyday driving.

GM is hoping the 2024 Chevrolet Equinox EV can do the same for its growing all-electric vehicle portfolio as it begins shipping the crossover to dealers amid slower-than-expected demand for EVs. The rollout marks the latest test for mass-market adoption as well as the company’s production of new “Ultium” EV technologies.

“It’s very important to us but, more importantly, it’s very important to customers and people who want affordability and electric vehicles,” GM President Mark Reuss told CNBC last week. “This is about $27,500 [including up to $7,500 in federal incentives] for an over 300-mile range car, which is right in the heart of everything.”

Offering a new EV for around $25,000 has long been a target for automakers such as GM, Tesla and others. The importance of such a vehicle has grown more apparent as Chinese automakers like BYD and Nio grow their sales of less expensive EVs outside of China.

The Equinox EV is launching with higher-priced models that start at roughly $43,000 to $51,100 (without any incentives). The entry-level Equinox LT model, starting at about $35,000, is expected later this year.

“The Equinox EV is the vehicle that’s really going to make a difference for a lot of customers that maybe previously haven’t been interested or looked at EVs,” Kathleen Murawski, marketing and advertising manager for gas-powered and Equinox EVs and Chevy Blazer EVs, told CNBC.

GM sells hundreds of thousands of gas-powered Equinox crossovers annually, including 212,701 last year. The crossover is typically one of GM’s bestselling vehicles and top five in sales for its segment, according to Autopacific.

Testing GM

The Equinox EV is GM’s new entry point for all-electric vehicles in the U.S. after the automaker discontinued the Chevy Bolt last year. It’s expected to be GM’s top-selling EV.

With such lofty sales expectations, it also will test the legacy automaker’s ability to successfully mass produce an Ultium-based EV following pricier vehicles such as the $110,000 GMC Hummer EV, $60,000 Cadillac Lyriq and a botched launch of the Blazer EV, starting at roughly $55,000, due to software issues.

“We’ve got the launch on this vehicle right. We’ve got the quality of this vehicle right. We’ve got the software of this vehicle right. We’re just super excited to see now where it goes,” GM President of Global Markets Rory Harvey told CNBC. “We think we’ve got a product that’s out there to win.”

The Equinox EV is arriving to market following the Blazer EV and alongside GM’s more than $96,000 Silverado EV RST. The company has already launched a work truck version of the Silverado EV.

The production ramp-up of GM’s new EV vehicles — using what the automaker calls its “Ultium” platform, batteries and other technologies — has been slower than the company and investors had expected. The Equinox will change that, according to GM North America President Marissa West.

“We’ve eliminated the production constraints, and now it’s about meeting the customer demand with the most affordable, longest-range vehicle on the market in the heart of our Chevrolet lineup, which is … the heart and soul of General Motors,” West said during an interview Monday.

Paul Waatti, director of industry analysis at AutoPacific, agrees. He called the Equinox a critical product for GM’s EV plans as well as a potential redemption opportunity for the company following its disappointing ramp-up of current Ultium-based products.

“GM is going to start to see real volume in their EV portfolio,” Waatti said. “It was a slow start, but now they’re going to have the big volume players in the mix. It’s really a turning point for GM.”

“[The Equinox is] undoubtedly the most significant Ultium launch for GM yet,” he added. “It might just be the most compelling EV on the market right now.”

Equinox EV

All of that being said, the Equinox EV is an Equinox in name only. It shares little to nothing with the traditional gas-powered vehicle, which the company redesigned to look more rugged for the 2025 model year.

The Equinox EV is wider and lower than the traditional crossover. It’s a result of GM’s Ultium EV platform, aerodynamics and other targeted features for the vehicle, including an up to EPA-estimated 319 miles of range on a single charge.

A standard front-wheel-drive Equinox EV has a 213 horsepower and 236 foot-pounds of torque, according to company estimates. GM says optional all-wheel-drive models have an estimated 288-horsepower and 333 foot-pounds of torque.

Outside of the U.S., the Equinox EV will be sold in Canada, Mexico, the Middle East and some South American markets such as Brazil.

GM’s 2024 Chevrolet Equinox EV (right) next to a gas-powered Chevy Equinox on May 16, 2024 in Detroit.

Michael Wayland / CNBC

Brad Franz, director of Chevy car and crossover marketing, said retaining the familiar names for the EVs was a “strategic decision” to leverage names people know and trust.

“The Chevy proposition here is these can make your life easier. Not only easier, but better,” he said Thursday during a media event. “How are we going to tackle that? We’ll start with just leveraging our brand reputation.”

Keeping the same names also aligns with the company’s target to exclusively offer EVs to consumers by 2035. While the automaker hasn’t shifted that goalpost in light of slower-than-expected sales of EVs, it has recently shifted its messaging to note the transition will be based on customer demand.

GM ranked fourth in U.S. market share of all-electric vehicles during the first quarter, representing 6.1% of new EVs sold, according to data provided by Motor Intelligence. Tesla, at 52.3%, is by far the leader in estimated U.S. EV sales, followed by Hyundai, including Kia, at 9.3% and Ford Motor at 7.5%.

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‘Quiet wealth’ takes on new meaning with super-private deals for mansions, art and classic cars

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

The rich have taken “quiet wealth” to a new level, turning to private purchases of mansions, art and classic cars designed to avoid attention, according to experts.

Auction companies and luxury real estate brokers say wealthy buyers and sellers are increasingly turning to private sales and off-market listings to avoid social media and prying eyes. While public auction sales are declining in the art world, private sales — done behind closed doors between discreet buyers and sellers — are growing.

Last year, while combined public auction sales for Sotheby’s, Christie’s and Phillips fell by 19%, private sales increased by 4% at Sotheby’s and 5% at Christie’s, totaling $2.4 billion across the two auction houses. CNBC reported in February that Christie’s had sold a Mark Rothko painting for over $100 million to hedge-fund billionaire Ken Griffin, even as public auctions continued to decline.

Classic cars are also seeing a shift to private sales, especially with the most expensive and rare models. RM Sotheby’s, the classic-car auction company, has sold trophy Ferraris, Porsches and other trophy cars by public auction for more than 30 years. But its newly formed RM Sotheby’s private sales division has seen its sales more than quadruple over the past four years, according to Shelby Myers, global head of private sales for RM Sotheby’s.

Private sales, where cars are discreetly brokered between buyer and seller without an auction or public price, now account for nearly a third of revenue, he said.

“We’ve definitely seen a trend where people want to transact privately,” Myers said. “Discretion today is key. People can buy without the whole world staring at them.”

The rise in private sales for classic cars, art, real estate and other markets is being driven by social media, technology and cooling prices for collectibles. When a work of art or classic car comes up for auction, the results, and sometimes the seller, are highly public, spread over social media and blogs.

Collectibles experts say sellers don’t want to risk putting a treasured item up for auction only to have it stumble publicly on the auction block.

“It’s very public now when someone loses money on a sale, and no one wants that,” Myers said. “Up until a few years ago, you could buy a car at auction and the prices wouldn’t be splattered all over social media.”

Collectors who like to show their cars at events and award shows are also shying away from auctions since viewers are more likely to be able to figure out how much the owner paid.

“The car enthusiasts used to be a relatively small, tight-knit group,” Myers said. “Now when a major collector shows their car, it spreads like wildfire over blogs and the internet. And everyone can see who the owner is and what they paid.”

In real estate, many of the biggest deals in Manhattan, Malibu, Aspen, the Hamptons and Palm Beach are now in private or “off-market” sales. Also known as “whisper” or “pocket” listings, off-market properties are not listed on multiple listing services or public websites but are shopped around quietly among a select group of brokers and buyers.

A townhouse in Manhattan’s Greenwich Village sold this year in an off-market deal for $72.5 million, making it the most expensive townhouse ever sold downtown. A 13,000-square-foot mansion in Palm Beach sold off-market for $60 million, making it one the most expensive non-waterfront homes ever sold on the island. And Aspen’s first sale of over $100 million — Patrick Dovigi’s mansion on Red Mountain to billionaires Steve Wynn and Thomas Peterffy — was off-market, with the broker representing both the buyer and seller.  

Los Angeles is considered the birthplace of off-market deals, starting in the 1980s and 1990s when celebrities and movie stars wanted to avoid overzealous fans visiting their listed homes.

Over time, according to Douglas Elliman real estate agent Ernie Carswell in Los Angeles, wealthy, not but famous, sellers have joined in on the off-market craze.

“Even the average multi-millionaire or billionaire likes the idea of selling without the media and privacy invasion,” Carswell said.

Carswell said he currently has a billionaire client in New York who wants a special property in Los Angeles, so Carswell is looking at a mega-mansion owned by a Middle Eastern billionaire who is offering it only to select buyers. He’s also working on a deal in Palm Springs with a celebrity selling a home he didn’t want to be publicly shown to a billionaire buyer who doesn’t want any photos of his new home on the web.

“They don’t want burglars to know how to get to the bedroom, or how much land there is or how to get through the hedges,” Carswell said. “I blame technology.”

Carswell said off-market listings don’t make sense for properties under $5 million since they have a larger possible buying pool and benefit from broader marketing. But for special mega-homes in Malibu, Bel Air or Beverly Hills priced over $20 million, the list of potential buyers is smaller, and most are already known to the brokers, which makes an off-market agreement more appealing. 

That makes broker relationships even more important — especially to the wealthy, Carswell said.

“Never before has the need for a skilled, connected real estate professional been more valuable, especially at the high end,” he said.

Still, some brokers say even for pricey properties, sellers who go private don’t get the highest price since they’re limiting their pool of potential buyers.

“They’re leaving money on the table,” said real estate broker Noble Black of Douglas Elliman. “There is a valid reason for not listing, you want privacy and discretion. But you’re paying a premium for that.”

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China’s automakers must adapt quickly or lose out on the EV boom in the face of regulatory scrutiny abroad and competition at home

Chinese new energy vehicle giant shows off the latest version of its Han electric sedan at the Beijing auto show on April 26, 2024.

CNBC | Evelyn Cheng

BEIJING — Chinese automakers, including state-owned auto giant GAC Group, can’t afford to take it easy in the country’s electric car boom if they want to survive.

Adoption of battery and hybrid-powered cars has surged in China, but an onslaught of new models has fueled a price war that’s forced Tesla to also cut its prices. While Chinese automakers also look overseas for growth, other countries are increasingly wary of the impact of the cars on domestic auto industries, requiring investment in local production. It’s now survival of the fittest in China’s already competitive EV market.

“The speed of elimination will only pick up,” Feng Xingya, president at GAC, told reporters on the sidelines of the Beijing auto show in late April. That’s according to a CNBC translation of his Mandarin-language remarks.

GAC slashed prices on its cars one week before the May 1 Labor Day holiday in China, Feng said, noting the price war contributed to its first-quarter sales slump. The automaker’s operating revenue fell year-on-year in the first quarter for the first time since 2020, according to Wind Information.

To stay competitive, Feng said GAC is partnering with tech companies such as Huawei, while working on in-house research and development. The automaker is the joint venture partner of Honda and Toyota in China, and has an electric car brand called Aion.

“In the short term, if your product isn’t good, then consumers won’t buy it,” Feng said. “You need to use the best tech and the best products to satisfy consumer needs. In the long term, you must have a core competitive edge.”

Expanding outside China

Factories go global

Part of GAC’s international strategy is to localize production, Wei said, noting the company is using a variety of approaches such as joint ventures and technology partnerships. He said GAC opened a factory in Malaysia in April and plans to open another in Thailand in June, with Egypt, Brazil and Turkey also under consideration.

GAC plans to establish eight subsidiaries this year, including in Amsterdam, Wei said. But the U.S. isn’t part of the company’s near-term overseas expansion plans, he said.

The difference today is that the overcapacity now has come together with vehicles that are very competitive

Stephen Dyer

AlixPartners, co-leader of the Greater China Business

U.S. and European officials have in recent months emphasized the need to address China’s “overcapacity,” which can be loosely defined as state-supported production of goods that exceeds demand. China has pushed back on such concerns and its Ministry of Commerce claimed that, from a global perspective, new energy faces a capacity shortage.

“There’s always been overcapacity in the Chinese auto industry,” said Stephen Dyer, co-leader of the Greater China business at consulting firm AlixPartners, and Asia leader for its automotive and industrials practice.

“The difference today is that the overcapacity now has come together with vehicles that are very competitive,” he told CNBC on the sidelines of the auto show. “So in our EV survey I was surprised to find that about 73% of U.S. consumers could recognize at least one Chinese EV brand. And Europe was close behind.”

Dyer expects that to drive overseas demand for Chinese electric cars. AlixPartners’ survey found that BYD had the highest brand recognition across the U.S. and major European countries, followed by Nio and Leap Motor.

BYD exported 242,000 cars last year and is also building factories overseas. The company’s sales are roughly split between hybrid and battery-powered vehicles. BYD no longer sells traditional fuel-powered passenger cars.

Tech competition

In addition to price, this year’s auto show in Beijing reflected how companies — Chinese and foreign — are competing on tech such as driver-assist software.

Chinese consumers placed almost twice as much importance on tech features compared with U.S. consumers, Dyer said, citing AlixPartners’ survey.

He noted how Chinese startups are so aggressive that a car may be sold with new tech, even if the software still has problems. “They know they can use over-the-air updates to rapidly fix bugs or add features as needed,” Dyer said.

Interest in tech doesn’t mean consumers are sold on battery-only cars. Dyer said that in the short term, consumers are still worried about driving range — meaning that hybrids are not only in demand, but often used without charging the battery.

Elon Musk meets with China's Premier Li Qiang to discuss Tesla, full-self driving and restrictions

Even Volkswagen is getting in on the “smart tech” race. The German auto giant revealed at the auto show its joint venture with Shanghai’s state-owned SAIC Motor teamed up with Chinese drone company DJI’s automotive unit to create a driver-assist system for the newly launched Tiguan L Pro.

The initial version of the SUV is fuel-powered, for which the company’s tagline is: “oil or electric, both are smart,” according to a CNBC translation of the Chinese.

Battery manufacturer CATL had a more prominent exhibition booth this year, likely in the hope of encouraging consumers to buy cars with its batteries, as competitors’ market share grows, said Zhong Shi, an analyst with the China Automobile Dealers Association.

Automotive chip companies Black Sesame and Horizon Robotics also had booths inside the main exhibition hall.

What customers want

Lotus Technology, a high-end U.K. car brand acquired by Geely, found in a survey of its customers their top requests were for automatic parking and battery charging, which would allow drivers to stay in the car.

That’s according to CFO Alexious Kuen Long Lee, who spoke with CNBC on the sidelines of the Beijing auto show. He noted the company now has robotic battery chargers in Shanghai.

Lotus and Nio last week also announced a strategic partnership on battery swapping and charging.

“I think there is a handing over of the baton where the Chinese brands are becoming much bigger and much stronger, and the foreign brands are still trying to decide what’s the best energy route,” said Lee, who’s worked in China since 1998. “Are they still deciding on the PHEV, are they still thinking about BEVs, are they still thinking about the internal combustion cars? The entire decision-making process becomes so complex, with so much resistance internally, that I think they’re just not being productive.”

But he thinks Lotus has found the right strategy by expanding its product line, and going straight to battery-powered cars. “Lotus today,” he said, “is similar to what international brands’ position [was] in China, probably back in 2000.”

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Why automakers are turning to hybrids in the middle of the industry’s EV transition

2023 Prius Prime on display, April 6, 2023.

Scott Mlyn | CNBC

DETROIT — As sales of all-electric vehicles grow more slowly than expected, major automakers are increasingly meeting their customers in the middle.

More and more companies are reconsidering the viability of hybrid cars and trucks to appease consumer demand and avoid costly penalties related to federal fuel economy and emissions standards.

The shifting strategies run counterintuitively to industrywide EV messaging of recent years. Many auto companies have begun to invest billions of dollars in all-electric vehicles, and the Biden administration has made a push to get more EVs on U.S. roadways as quickly as possible.

But hybrid vehicles — those with traditional internal combustion engines combined with EV battery technologies — could help the automotive industry lower fuel consumption and emissions in the short-term, while easing consumers into vehicle electrification.

Sales of traditional hybrid electric vehicles, or HEVs, such as the Toyota Prius, are outpacing those of all-electric vehicles in 2023, according to Edmunds. HEVs accounted for 8.3% of U.S. car sales, about 1.2 million vehicles sold, through November of this year. That share is up 2.8 percentage points compared with total sales last year.

EVs made up 6.9% of sales heading into December, or roughly 976,560 units, up 1.7 percentage points compared with total sales last year. Sales of plug-in hybrid electric vehicles, or PHEVs, accounted for only 1% of U.S. sales through November.

“There’s been so much talk over the past few years about the move toward electrification and sort of forgoing hybrids, but … hybrids are not dead,” said Jessica Caldwell, Edmunds executive director of insights. “There’s a lot of consumers out there that are interested in electrification, maybe not ready to go fully electric.”

Hybrids can also cost less and relieve many concerns typically associated with EVs such as range anxiety and lack of charging infrastructure. The average hybrid this year cost $42,381, according to Edmunds. That’s below the roughly $59,400 average for an EV; $60,700 for a PHEV; and $44,800 for a traditional vehicle.

Morgan Stanley earlier this month said Toyota Motor, Honda Motor and Hyundai Motor, including Kia, account for 9 out of 10 hybrid sales in the U.S. Representatives for those automakers said they are actively attempting to increase production and sales of hybrid vehicles in the U.S.

“While the transition to full battery electric transportation will take time, hybrids and plug-in hybrids will play an equally important role in Kia America’s near and mid-term goals,” Eric Watson, vice president of Kia America sales, said in a statement to CNBC.

And other companies, such as the Detroit automakers, are following suit.

Detroit Three automakers

The Detroit automakers have varying strategies for hybrid vehicles.

Ford Motor offers PHEVs but is leaning into HEVs, announcing plans in September to double sales of the V-6 hybrid model during the 2024 model year to roughly 20% in the U.S. It’s part of Ford CEO Jim Farley’s plans to quadruple the company’s production of gas-electric hybrids.

Ford’s hybrid sales through November of this year are up 23% over the same period in 2022 to more than 121,000 units, or 6.8% of its total sales through that point. In comparison, Ford’s EV sales are up 16.2% to roughly 62,500 units, accounting for 3.5% of its total sales.

Battery breakdown

Both hybrids and plug-in hybrids have a traditional engine combined with EV technologies. A traditional hybrid such as the Toyota Prius has electrified parts, including a small battery, to provide better fuel economy to assist the engine. PHEVs typically have a larger battery to provide for all-electric driving for a certain number of miles until an engine is needed to power the vehicle or electric motors.

Chrysler parent Stellantis, for its part, is leaning on PHEVs for its electrification strategy, before introducing a host of EVs starting next year. The company is the top seller of plug-in hybrid electric vehicles in the U.S., and the vehicles accounted for about 10% of the company’s third-quarter sales, led by Jeep Wrangler and Grand Cherokee SUVs.

But General Motors isn’t ready just yet to alter its EV plans, which include a goal to exclusively offer all-electric vehicles by 2035.

GM led the way for plug-in electric vehicles with the Chevrolet Volt during the 2010s. The company discontinued the vehicle in early 2019, citing demand and cost concerns.

Since then, the automaker has not offered another hybrid vehicle in the U.S. other than the recently launched Chevrolet Corvette E-Ray, a hybrid version of the famed sports car. GM does offer hybrids, including PHEVs, in China.

2024 Chevrolet Corvette E-Ray hybrid sports car

GM

“We still have a plan in place that allows us to be all light-duty vehicles EV by 2035,” GM CEO Mary Barra said Monday during an Automotive Press Association meeting in Detroit. “We’ll adjust based on where the customer is and where demand is. It’s not going to be ‘if we build it they will come.’ We’re going to be led by the customer.”

Her comments come after GM President Mark Reuss told CNBC in August that he was “flexible” regarding hybrids as a way of meeting federal regulations.

“If it means we have to do that by law, then we have to do that by law,” he said. “If there’s regulations that get dealt on us, then we’re going to look at everything in our toolbox to meet them.”

Federal regulations

Major auto companies, including the Detroit automakers, were counting on EVs to assist in offsetting the emissions and low fuel economies of larger SUVs and trucks that can cost them hundreds of millions of dollars in fines by the federal government.

GM and Stellantis were forced to pay a combined $363.8 million in penalties for failing to meet federal fuel-economy standards for cars and trucks they produced in previous years, according to information published by the National Highway Traffic Safety Administration in June.

Such fines would significantly increase under current proposals by the Biden administration to improve fuel efficiency of vehicles and move toward EVs, according to automaker lobbying groups.

The American Automotive Policy Council, a group representing the Detroit Three, earlier this year said the automakers would face more than $14 billion in noncompliance penalties between 2027 and 2032 barring significant changes to their fleets’ overall fuel efficiency. U.S. automakers have separately warned the fines would cost $6.5 billion for GM, $3 billion at Stellantis and $1 billion at Ford, according to Reuters.

NHTSA in July proposed boosting fuel efficiency requirements by 2% per year for passenger cars and 4% per year for pickup trucks and SUVs from 2027 through 2032, resulting in a fleetwide average fuel efficiency of 58 mpg.

With EVs playing a lesser role than anticipated to boost those fleetwide averages, hybrids could save automakers millions.

“Even without electric vehicles, there’s an expectation that electrification of an internal combustion engine is going to be necessary to meet regulations anyway,” said Stephanie Brinley, principal automotive analyst at S&P Global Mobility.

Industry leader

The resurgence of hybrids is especially important for Toyota. The world’s largest automaker is considered the pioneer of traditional hybrids, with the Prius.

The company ironically became a target of environmental groups last year for its strategy to move forward with a mix of hybrids, PHEVs and EVs, which critics viewed as a lack of commitment to an all-electric future.

Toyota’s argument at the time, and still, is that it’s meeting consumer needs and planning for a more gradual global adoption that will naturally include some markets shifting to EVs sooner than others.

The company further says it takes into account the entire environmental impact of producing EVs compared with hybrid electrified vehicles, arguing it can produce eight 40-mile plug-in hybrids for every one 320-mile battery electric vehicle and save up to eight times the carbon emitted into the atmosphere.

“People are finally seeing reality,” Toyota Chairman and former CEO Akio Toyoda, who has been heavily criticized for the slower approach on EVs, said in October regarding EVs, according to The Wall Street Journal.

Toyota CEO Akio Toyoda speaks during a small media roundtable on Sept. 29, 2022 in Las Vegas.

Toyota

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As the market enters correction territory, don’t blame the American consumer

An Amazon.com Inc worker prepares an order in which the buyer asked for an item to be gift wrapped at a fulfillment center in Shakopee, Minnesota, U.S., November 12, 2020.

Amazon.com Inc | Reuters

The initial third-quarter report on gross domestic product showed consumer spending zooming higher by 4% percent a year, after inflation, the best in almost two years. September’s retail sales report showed spending climbing almost twice as fast as the average for the last year. And yet, bears like hedge-fund trader Bill Ackman argue that a recession is coming as soon as this quarter and the market has entered correction territory.

For an economy that rises or falls on the state of the consumer, third-quarter earnings data supports a view of spending that remains mostly good. S&P 500 consumer-discretionary companies that have reported through Oct. 25 saw an average profit gain of 15%, according to CFRA — the biggest revenue gain of the stock market’s 11 sectors.

“People are kind of scratching their heads and saying, ‘The consumer is holding up better than expected,'” said CFRA Research strategist Sam Stovall said. “Consumers are employed. They continue to buy goods as well as pursue experiences. And they don’t seem worried about debt levels.” 

How is this possible with interest rates on everything from credit cards to cars and homes soaring?

It’s the anecdotes from bellwether companies across key industries that tell the real story: Delta Air Lines and United Airlines sharing how their most expensive seats are selling fastest. Homeowners using high-interest-rate-fighting mortgage buydowns. Amazon saying it’s hiring 250,000 seasonal workers. A Thursday report from Deckers Outdoor blew some minds — in what has been a tepid clothing sales environment — by disclosing that embedded in a 79% profit gain that sent shares up 19% was sales of Uggs, a mature line anchored by fuzzy boots, rising 28%.

The picture they paint largely matches the economic data — generally positive, but with some warts. Here is some of the key evidence from from the biggest company earnings reports across the market that help explain how companies and the American consumer are making the best of a tough rate environment.

How homebuilders are solving for mortgages rates

No industry is more central to the market’s notion that the consumer is falling from the sky than housing, because the number of existing home sales have dropped almost 40% from Covid-era peaks. But while Coldwell Banker owner Anywhere Real Estate saw profit fall by half, news from builders of new homes has been pretty good.

Most consumers have mortgages below 5%, but for new homebuyers, one reason that rates are not biting quite as sharply as they should is that builders have figured out ways around the 8% interest rates that are bedeviling existing home sellers. That helps explains why new home sales are up this year. Homebuilders are dipping into money that previously paid for other incentives to pay for offering mortgages at 5.75% rather than the 8% level other mortgages have hit. At PulteGroup, the nation’s third-biggest builder, that helped drive an 8% third-quarter profit jump and 43% climb in new home orders for delivery later, much better than the government-reported 4.5% gain in new home sales year-to-date.

“What we’ve done is simply redistribute incentives we’ve historically offered toward cabinets and countertops, and redirected those to interest rate incentives,” PulteGroup CEO Ryan Marshall said. “And that has been the most powerful thing.”

The mechanics are complex, but work out to this: Pulte sets aside about $35,000 for incentives to get each home to sell, or about 6% of its price, the company said on its earnings conference call. Part of that is paying for a mortgage buydown. About 80% to 85% of buyers are taking advantage of the buydown offer. But many are splitting the funds, mixing a smaller rate buydown and keeping some goodies for the house, the company said.

Wells Fargo economist Jackie Benson said in a report that builders may struggle to keep this strategy going if mortgage rates stay near 8%, but new-home prices have dropped 12% in the last year. In her view, incentives plus bigger price cuts than most existing homes’ owners will offer is giving builders an edge. 

At auto companies, price cuts are in, and more are coming

Car sales picked up notably in September, rising 24% year-over-year, more than twice the year-to-date gain in unit sales. But they were below expectations at electric-vehicle leader Tesla, which blamed high interest rates, and at Ford

“I just can’t emphasize this enough, that for the vast majority of people buying a car it’s about the monthly payment,” Tesla CEO Elon Musk said on its earnings call. “And as interest rates rise, the proportion of that monthly payment that is interest increases.” 

Maybe, but that’s not what’s happening at General Motors, even if investor reaction to good numbers at GM was muted because of the strike by the United Auto Workers union. 

GM tops Q3 expectations but pulls full-year guidance due to mounting UAW strike costs

GM beat earnings expectations by 40 cents a share, but shares fell 3% because of investor worries about the strike, which forced GM to withdraw its fourth-quarter earnings forecast on Oct. 24. Ford, which settled with the UAW on Oct. 25, said the next day it had a “mixed” quarter, as profit missed Wall Street targets due to the strike. Consumers came through, as unit sales rose 7.7% for the quarter, with truck and EV sales both up 15%. GM CEO Mary Barra said on GM’s analyst call that the company gained market share, posting a 21% gain in unit sales despite offering incentives below the industry average.

“While we hear reports out there in the macro that consumer sentiment might be weakening, etc., we haven’t seen that in demand for our vehicles,” GM CFO Paul Jacobson told analysts. But Ford CFO John Lawler said car prices need to decline by about $1,800 to be as affordable as they were before Covid. “We think it’s going to happen over 12 to 18 months,” he said. 

Tesla’s turnaround plan turns on continuing to lower its cost of producing cars, which came down by about $2,000 per vehicle in last year, the company said. Along with federal tax credits for electric vehicles, a Model Y crossover can be had for about $36,490, or as little as $31,500 in states with local tax incentives for EVs. That’s way below the average for all cars, which Cox Automotive puts at more than $50,000. But Musk says some consumers still aren’t convincible. .

“When you look at the price reductions we’ve made in, say, the Model Y, and you compare that to how much people’s monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged,” Musk said. “They can’t afford it.”

Most banks say the consumer still has cash, but not Discover

To know how consumers are doing, ask the banks, which disclose consumer balances quarterly. To know if they’re confident, ask the credit card companies (often the same companies) how much they are spending. 

In most cases, financial services firms say consumers are doing well.

At Bank of America, consumer balances are still about one-third higher than before Covid, CEO Brian Moynihan said on the company’s conference call. At JPMorgan Chase, balances have eroded 3% in the last year, but consumer loan delinquencies declined during the quarter, the company said.

“Where am I seeing softness in [consumer] credit?” said chief financial officer Jeremy Barnum, repeating an analyst’s question on the earnings call. “I think the answer to that is actually nowhere.”

Among credit card companies, the “resilient” is still the main story. MasterCard, in fact, used that word or “resilience” eight times to describe U.S. consumers in its Oct. 26 call.

“I mean, the reality is, unemployment levels are [near] all-time record lows,” MasterCard chief financial officer Sachin Mehra said.

At American Express, which saw U.S. consumer spending rise 9%, the mild surprise was the company’s disclosure that young consumers are adding Amex cards faster than any other group. Millennials and Gen Zers saw their U.S. spending via Amex rise 18%, the company said.

“Guess they’re not bothered by the resumption of student loan payments,” Stovall said.

Consumer data is more positive than sentiment, says Bankrate's Ted Rossman

The major fly in the ointment came from Discover Financial Services, one of the few banks to make big additions to its loan loss reserves for consumer debt, driving a 33% drop in profit as Discover’s loan chargeoffs doubled.  

Despite the fact that U.S. household debt burdens are almost exactly the same as in late 2019, and declined during the quarter, according to government data, Discover chief financial officer John Greene said on its call, “Our macro assumptions reflect a relatively strong labor market but also consumer headwinds from a declining savings rate and increasing debt burdens.”

At airlines, still no sign of a travel recession

It’s good to be Delta Air Lines right now, sitting on a 59% third-quarter profit gain driven by the most expensive products on their virtual shelves: First-class seats and international vacations. Also good to be United, where higher-margin international travel rose almost 25% and the company is planning to add seven first-class seats per departure by 2027. Not so good to be discounter Spirit, which saw shares fall after reporting a $157 million loss.

“With the market continuing to seemingly will a travel recession into existence despite evidence to the contrary from daily [government] data and our consumer surveys, Delta’s third-quarter beat and solid fourth-quarter guide and commentary should finally put the group at ease about a consumer “cliff,” allow them to unfasten their seatbelts and walk about the cabin,” Morgan Stanley analyst Ravi Shanker said in a note to clients.

One tangible impact: United is adding 20 planes this quarter, though it is pushing 12 more deliveries into 2024, while Spirit said it’s delaying plane deliveries, and focusing on its proposed merger with JetBlue and cost-cutting to regain competitiveness as soft demand for its product persists into the holiday season.

As has been the case throughout much of 2023, richer consumers — who contribute the greater share of spending — are doing better than moderate-income families, Sundaram said.

The goods recession is for real

Whirlpool, Ethan Allen and mattress maker Sleep Number all saw their stocks tumble after reporting bad earnings, all of them experiencing sales struggles consistent with the macro data.

This follows a trend now well-entrenched in the economy: people stocked up on hard goods, especially for the house, during the pandemic, when they were stuck at home more. All three companies saw shares surge during Covid, and growth has slacked off since as they found their markets at least partly saturated and consumers moved spending to travel and other services.

“All of the stimulus money went to the furniture industry,” Sundaram said, exaggerating for effect. “Now they’ve been falling apart for the last year.”

Ethan Allen sales dropped 24%, as the company said a flood in a Vermont factory and softer demand were among the causes. At Whirlpool, which said in second-quarter earnings that it was moving to make up slowing sales to consumers by selling more appliances to home builders, “discretionary purchases have been even softer than anticipated, as a result of increased mortgage rates and low consumer confidence,” CEO Marc Bitzer said during Thursday’s earnings call. Its shares fell more than 20%. 

Amazon’s $1.3 billion holiday hiring spree

Amazon is making its biggest-ever commitment to holiday hiring, spending $1.3 billion to add the workers, mostly in fulfillment centers. 

That’s possible because Amazon has reorganized its warehouse network to speed up deliveries and lower costs, sparking 11% sales gains the last two quarters as consumers turn to the online giant for more everyday repeat purchases. Amazon also tends to serve a more affluent consumer who is proving more resilient in the face of interest rate hikes and inflation than audiences for Target or dollar stores, according to CFRA retailing analyst Arun Sundaram said.

“Their retail sales are performing really well,” Sundaram said. “There’s still headwinds affecting discretionary sales, but everyday essentials are doing really well.

All of this sets the stage for a high-stakes holiday season.

PNC still thinks there will be a recession in early 2024, thanks partly to the Federal Reserve’ rate hikes, and thinks investors will focus on sales of goods looking for more signs of weakness. “There’s a lot of strength for the late innings” of an expansion, said PNC Asset Management chief investment officer Amanda Agati.

Sundaram, whose firm has predicted that interest rates will soon drop as inflation wanes, thinks retailers are in better shape, with stronger supply chains that will allow strategic discounting more than last year to pump sales. The Uggs sales outperformance was attributed to improved supply chains and shorter shipping times as the lingering effects of the pandemic recede.

“Though there are headwinds for the consumer, there’s a chance for a decent holiday season,” he said, albeit one hampered still by the inflation of the last two years. “The 2022 holiday season may have been the low point.” 

Deloitte predicts soft holiday sales

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UAW strike brings blue-collar vs. billionaire battle to Detroit

DETROIT — The United Auto Workers strike is bringing a blue-collar versus billionaire battle to the Motor City, just as UAW President Shawn Fain wanted.

The outspoken union leader has weaponized striking — historically a last resort for the union — after less than 24 hours into a work stoppage arguably better than any UAW president has in modern times.

It wasn’t by accident.

Fain, a quirky yet emboldened leader, has meticulously brought the UAW back into the national spotlight after decades of near irrelevance. He wants to represent not just union members but also America’s embattled middle class, which UAW helped create.

United Auto Workers union President Shawn Fain joins UAW members who are on a strike, on the picket line at the Ford Michigan Assembly Plant in Wayne, Michigan, September 15, 2023.

Rebecca Cook | Reuters

To do so, he has leveraged a yearslong national labor movement and a growing disgust for wealthy individuals and corporations among many Americans — starting with his first time addressing the union’s more than 400,000 members during his inauguration speech in March.

“We’re here to come together to ready ourselves for the war against our only one and only true enemy, multibillion-dollar corporations and employers who refuse to give our members their fair share,” Fain said at the time. “It’s a new day in the UAW.”

Fain’s comments Friday morning as he joined UAW members and supporters picketing outside a Ford plant in Michigan — one of three facilities the company is currently striking — echoed everything he said during that first speech.

“We got to do what we got to do to get our share of economic and social justice in this strike,” Fain said outside the Ford Bronco SUV and Ranger pickup plant. “We’re going to be out here until we get our share of economic justice. And it doesn’t matter how long it takes.”

Fain’s upbringing plays into his strong unionism and religious beliefs, which he has growingly talked about with members as he emphasizes “faith” in the UAW’s cause. Two of his grandparents were UAW GM retirees, and one grandfather started at Chrysler in 1937, the year the workers joined the union. Fain, who joined the UAW in 1994, even keeps one of his grandfather’s pay stubs in his wallet as “a reminder” of where he came from. 

National media and others really started paying attention to Fain when he said the union would withhold a reelection endorsement of President Joe Biden, who has called himself the “most pro-union president in history.” Fain and Biden have spoken and met, but the union leader has not shown much support for the president. In response to comments by the president Friday, Fain said: “Working people are not afraid. You know who’s afraid? The corporate media is afraid. The White House is afraid. The companies are afraid.”

While many past union leaders have talked such talk, Fain has thus far delivered on his promises to members without batting an eye — causing General Motors, Ford Motor and Stellantis to go into crisis mode this week as the UAW follows through on that promise to members.

“We’ve never seen anything like this; it’s frustrating,” Ford CEO Jim Farley told CNBC’s Phil LeBeau Thursday as he criticized Fain and the union for what he said was a lack of communication and counteroffers. “I don’t know what Shawn Fain is doing, but he’s not negotiating this contract with us, as it expires.”

In a statement Friday, Ford said that the UAW’s partial strike at its Michigan Assembly Plant has forced it to lay off about 600 workers.

“This is not a lockout,” Ford said. “This layoff is a consequence of the strike at Michigan Assembly Plant’s final assembly and paint departments, because the components built by these 600 employees use materials that must be e-coated for protection. E-coating is completed in the paint department, which is on strike.”

GM CEO Mary Barra echoed Farley’s feelings Friday morning on CNBC’s “Squawk Box.”

“I’m extremely frustrated and disappointed,” she said. “We don’t need to be on strike right now.”

Both CEOs said everything they could to indicate they believe Fain may not be bargaining in good faith without using those exact words, which could justify a complaint with the National Labor Relations Board.

The UAW in late August filed unfair labor practice charges against GM and Stellantis with the NLRB, alleging they did not bargain with the union in good faith or a timely manner. It did not file a complaint against Ford. GM and Stellantis have denied those allegations.

Ford CEO Jim Farley: No way we would be sustainable as a company with UAW's wage proposal

Several past union leaders and company bargainers who spoke to CNBC hailed the way Fain has been able to propel the UAW into the national spotlight, including pausing bargaining for a Friday rally and march with Sen. Bernie Sanders, the progressive lawmaker from Vermont. Sanders, whose surprise 2016 Democratic presidential primary win in Michigan helped cement his national prominence, has lent support to numerous labor movements around the country as he rails against the billionaire class.

“I think they’re just doing an outstanding job,” said respected former UAW President Bob King, who cited growing support for the union among the public and the union’s own members. “Both those measurements say that UAW communications has been outstanding.”

UAW members have taken notice — especially after many of them disdained union leadership during and after a yearslong federal corruption investigation that landed two past UAW presidents and more than a dozen others in prison.

“For all the years that I’ve worked here, it’s never been this strong,” said Anthony Dobbins, a 27-year autoworker, early Friday morning while picketing the Ford plant in Michigan. “This is going to make history right here because we are trying to get what we deserve.”

Dobbins, a UAW Local 600 union representative, balked at current record offers by the automakers that have included roughly 20% pay increases, thousands of dollars in bonuses, retention of the union’s platinum health care and other sweetened benefits.

“That’s not working for us. Give us what we asked for,” Dobbins said. “That’s what we want. We have to work seven days, overtime, just to make ends meet.”

United Auto Workers President Shawn Fain, center, poses with Anthony Dobbins, right, a 27-year autoworker, and others as the union pickets a Ford plant in Wayne, Michigan, Sept. 15, 2023.

Michael Wayland / CNBC

Key demands from the union have included 40% hourly pay increases; a reduced, 32-hour, workweek; a shift back to traditional pensions; the elimination of compensation tiers; and a restoration of cost-of-living adjustments. Other items on the table include enhanced retiree benefits and better vacation and family leave benefits.

Automakers have argued such demands would cripple the companies. Farley even said the company would have “gone bankrupt by now” under the union’s current proposals and members would not have benefited from $75,000 in average profit-sharing over the last decade.

Ford sources said the automaker would have lost $14.4 billion over the last four years if the current demands had been in effect, instead of recording nearly $30 billion in profits.

Such profits are exactly what Fain has said UAW members deserve to share in. But his strategy to get workers a larger piece of the pie carries great risks.

“This is not going to be positive from an industry perspective or for GM,” Barra said Friday.

Many outside the union believe if Fain pushes too hard, it could lead to long-term job losses for the union. A former high-ranking bargainer for one of the automakers told CNBC that it’s nearly guaranteed the companies cut union jobs through product allocation, plant closures or other means to offset increased labor costs.

“They’re going to have to pay up. The question is how much,” said the longtime bargainer, who agreed to speak on the condition of anonymity. “This ends up with fewer jobs. That’s how the automakers cut costs.”

Fain and other union leaders have argued that meeting the companies in the middle has led to dozens of plant closures, fewer union members and a growing divide between blue-collar workers and the wealthy.

So why not fight?

“This is about us doing what we got to do to take care of the working class,” Fain said Friday. “This isn’t just about the UAW. This is about working people everywhere in this country. No matter what you do for a living, you deserve your fair share of equity.”

GM CEO Mary Barra on UAW strike: We put a historic offer on the table

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Why auto worker strikes against GM, Ford and Stellantis seem inevitable

Members of the United Auto Workers union hold a rally and practice picket near a Stellantis plant in Detroit, Aug. 23, 2023.

Michael Wayland / CNBC

DETROIT – United Auto Workers President Shawn Fain appears ready to fire up the picket lines.

The union’s bulldog new leader has repeatedly vowed to drive a hard bargain with Detroit automakers General Motors, Ford Motor and Stellantis in contract negotiations ahead of an expiration at 11:59 p.m. on Sept 14.

He’s maintained it’s a hard deadline that his leadership team does not plan to extend, like the union has in the past, and that he’s not afraid to take roughly 150,000 auto workers out of factories if necessary.

That — plus the revelation late Thursday that Fain and the union filed unfair labor practice charges against GM and Stellantis with the National Labor Relations Board, claiming the companies weren’t bargaining in good faith — makes a strike against one, if not all three of the automakers, increasingly inevitable.

Unlike prior union leaders, Fain is attempting to negotiate with all three automakers at once, refusing to select a “target” company to focus on while extending deals at the others. He’s also been far more confrontational with the automakers compared to previous union leaders, at times launching personal attacks on executives.

There’s a belief among some industry analysts and experts that a strike, or several, may be necessary to convince UAW members that the union leaders fought as hard as they could to reach the demands.

“I expect there to be a strike,” said Art Wheaton, a labor professor at the Worker Institute at Cornell University. “I think there’s a reasonable chance they strike Stellantis first and then give a couple more days for Ford and GM to give a better offer.”

Wheaton believes that a strike at Stellantis is nearly guaranteed with the sides as far apart as they are now. The union could use that work stoppage as a warning to GM and Ford to finalize their deals, he said.

“I think a strike is almost essential at Stellantis or they will never get a deal ratified,” Wheaton said. “Stellantis is picking a fight, saying, ‘Try me if you dare.'”

Strikes could take various forms, including a national strike, where all workers under the contract cease working, or targeted work stoppages at certain plants over local contract issues.

During a Facebook Live on Aug. 8, 2023, UAW President Shawn Fain

Screenshot

Prolonged strikes against all three of the automakers would be unprecedented and quickly impact the automotive supply chain, U.S. economy and domestic production.

The Biden administration has taken particular interest in the talks, including the appointment of longtime Democratic adviser Gene Sperling to monitor the situation for the White House.

Wall Street watching

Wall Street has warned of a potential work stoppage for several months, and investors have taken heed.

A brief survey of 99 investors by Morgan Stanley found 58% believe a strike is “extremely likely.” That’s followed by 24% who said it’s “somewhat likely.” Just 16% said a strike was unlikely, while 2% said it was “neither likely not unlikely.”

Industry and labor experts agree, and for good reason.

The impending contract deadline follows combative rhetoric by Fain and other union leaders; a years-long labor movement involving work stoppages, including the UAW; and ambitious demands by the union for 40% or more pay increases, retention of platinum healthcare and a 32-hour workweek.

Such demands aren’t typically made public or even fully reported until close to the end of the negotiations, in part as an effort to bargain in good faith but also to avoid setting expectations — either too high or too low — for UAW members, who need to ratify the contracts after the sides announce a tentative agreement.

“I’ve always said that the best way to reach agreements is to be negotiating with each other and not in the newspapers, TV or anywhere else,” said Dennis Devaney, senior counsel at Clark Hill who formerly served as a NLRB board member and attorney for GM and Ford. “I don’t think the public negotiation … is really going to move things along.”

United Auto Workers members on strike picket outside General Motors’ Detroit-Hamtramck Assembly plant on Sept. 25, 2019 in Detroit.

Michael Wayland / CNBC

o be clear, it’s not exclusively up to Fain to call for strikes. It’s up to the UAW’s 14-member International Executive Board (IEB), which Fain leads as president. The leaders, based on weighted votes, must approve such a work stoppage by a two-thirds majority vote.

Then there’s the question of how long a strike would last.

Of its surveyed investors, Morgan Stanley found the vast majority of respondents (96%) expected a potential strike to last longer than a week. Over a third (34%) expect the strike to last longer than a month.

A strike against GM in 2019 during the last round of contract negotiations lasted 40 days and cost the automaker $3.6 billion in earnings that year, GM reported at the time.

The UAW has more than $825 million in its strike fund, which it uses to pay eligible members who are on strike. The strike pay is $500 per week for each member.

Assuming 150,000 or so UAW members covered by the contracts, strike pay would cost the union about $75 million per week. A fund of $825 million, then, would cover about 11 weeks. One caveat: that doesn’t include health-care costs that the union would cover, such as temporary COBRA plans, that would likely drain the fund far more quickly.

Ratification

For much of the union’s history, it was largely expected that members would ultimately approve whatever deal was bargained and endorsed by UAW leaders.

However, in recent negotiations, that hasn’t been the case and the sides have needed to return to the negotiating table.

That was the situation two rounds of negotiations ago, in 2015, with then-Fiat Chrysler, now Stellantis, workers, who voted down a tentative agreement. That same year, GM skilled trade workers also voted against a tentative deal with the Detroit automaker, stalling ratification.

Typically, once a tentative deal is reached between the union and an automaker, the members of that automaker will then vote by local organization on whether to accept the tentative agreement and make it a contract. The whole ratification process can take about two weeks for each company.

“The UAW’s tentative agreement with an automaker is really a set of agreements—the main text, as well as appendixes for different aspects, such as pensions and retirement plans, health care benefits, supplemental unemployment benefits, profit sharing, personal savings plans, life and disability benefits, dependent care benefits, and salaried workers (for those who are also UAW-represented),” said Kristin Dziczek, automotive policy advisor for the Federal Reserve Bank of Chicago’s Detroit branch, in a blog post.

In 2019, it took eight additional weeks to negotiate and ratify all three agreements once the first tentative agreement was reached following GM’s strike. The negotiations and ratification voting ended in early December.

Spokespeople for the automakers declined to comment directly for this article, but reiterated that their teams continue to bargain in good faith with the union in hopes of deals that benefit both sides.

– CNBC’s Michael Bloom contributed to this report.

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How gas station economics will change in the electric vehicle charging future

As electric vehicles proliferate, some gas stations are making expensive overhauls to add EV charging stations. 

In most cases, they aren’t scrapping traditional liquid fuel pumps. But select locations, including an RS Automotive in Takoma Park, Md., and a Shell station in Fulham, England, have made a full switch.

Location, cost, power requirements and conversion time are among the multiple considerations that factor into a gas station’s decision to convert all or a portion of their existing infrastructure to allow for EV charging. 

“Figuring out how to do this on an active site can be complex and challenging,” said Neha Palmer, chief executive of TeraWatt Infrastructure, which is developing a network of electric vehicle charging centers for fleet operations across California, Arizona, and New Mexico. “How do you sequence the construction when you have vehicles that might want to fuel there?” 

Here’s what gas station owners need to know about the EV charging trend and their future.

The EV fast-charging model

Locations like office complexes, hospitals and hotels typically offer a slower charging option, since people generally stay put for hours at a time. Gas stations, however, are investing in Level 3 chargers, which are more powerful and generally charge a car in 20 to 30 minutes. 

While slower charging stations are often free to motorists, that’s not generally true for fast charging stations, given ongoing operational expenses such as electricity and extra fees charged by utilities in commercial settings, said Seth Cutler, chief operating officer of EV Connect, whose software tools help companies build charging station networks.

Big oil company franchisers and car dealers are on board

For large oil giants, adding EV chargers is both a defensive and offensive play. 

Gas station numbers have been decreasing at a sharp rate in the past three decades and the trend is expected to continue in the coming years, according to Shubhendra Anand, vice president of research and strategy at Market Research Future. In fact, at least a quarter of service stations globally are at risk of closure by 2035 without significant business model tweaks, according to consulting firm BCG.

The Biden administration has a stated goal of having 500,000 electric vehicle chargers nationally where EVs make up at least 50% of new car sales by 2030. By current administration estimates, there are more than three million EVs and more than 130,000 public chargers nationwide.

The European oil majors are among the energy sector leaders in the global EV charging push.

Shell has EV-charging-only mobility hubs in China and the Netherlands, in addition to the Fulham location. The company intends to own more than 70,000 public EV charge points worldwide by 2025, and 200,000 by 2030, according to an email statement from Barbara Stoyko, senior vice president of mobility for Shell Americas.

BP also sees the need for mixed-use hybrid refueling and EV charging stations, according to Sujay Sharma, chief executive of BP’s electric vehicle charging business in the U.S. “Today’s gas stations are well positioned to adopt EV charging due to locations in high-demand areas, in addition to their existing convenience offerings including restrooms, food and beverage,” Sharma stated in an email. 

Franchise car dealers are also increasingly getting on board, thanks to pushes from automakers like GM and Ford.

As of late last year, 65% of Ford’s dealers had opted into the EV certification program (a little under 2,000, according to data shared by Ford), as it has started to make the role of car dealers central to the EV transition process. 

The National Automobile Dealers Association said in a May release that franchise owners will spend an estimated $5.5 billion on EV infrastructure across OEM brands, with per store costs ranging from $100,000 to over $1 million. 

Upfront costs can be jaw-dropping, incentives help

Adding EV charging capabilities is not a one-two decision that owners should take lightly. Indeed, the return on investment could be seven to 10 years on average, according to an estimate provided by Yair Nechmad, co-founder and chief executive of Nayax, a global commerce enablement and payments platform, which offers its services to gas stations.

The hardware and software for fast charging can run between $50,000 for one charger and $500,000 for multiple fast chargers and dispensers, said Michael Hughes, chief revenue officer of ChargePoint Holdings, a technology company that makes EV charging hardware and software to help drivers find local charging stations and amenities. The infrastructure, meanwhile, which includes the cost of breaking ground, running power, permits and contractors, generally costs about twice that, he said.

That makes it advisable to incur all the infrastructure changes upfront, even if a gas station only intends to make a few chargers available at the onset, said Rohan Puri, chief executive of Stable Auto Corporation, which helps make charging stations more profitable for companies that own and operate them. His advice: “Put in as much power as you think you’re going to need in 10 years.”

There are numerous federal, state and utility-based incentives for commercial businesses to purchase and install fast chargers. This includes the U.S. Department of Transportation’s Federal Highway Administration NEVI Formula Program, which provides generous funding to states to strategically deploy EV charging stations. 

Gas station owners can search for information on incentive programs they may qualify for.

Location is a key factor, gas station franchise concerns

Even with incentives, there can be barriers to entry, location being a major factor. According to the U.S. Department of Energy, 80 percent of EV charging happens at home, which makes adding EV charging less appealing for in-town gas stations, Hughes said. Local gas stations also don’t generally have amenities to keep people entertained while they are charging their vehicles.

Real estate can also be prohibitive. A traditional gas station may have two islands with four pumps each for liquid fuel; the same utilization rate would require about 40 charging stations, Hughes said.

By contrast, gas stations along major highways between highly traveled destinations can be ideal for electric charging hubs. These locations tend to have multiple amenities, offering people the opportunity to grab a cup of coffee, get a quick bite to eat, stretch their legs or walk the dog while they charge their vehicle, Hughes said.

Convenience stores like Sheetz, Wawa, Royal Farms and Buc-ee’s that double as gas station operators are also starting to add electric chargers at certain locations, said Albert Gore, executive director of The Zero Emission Transportation Association, a federal coalition that advocates for EVs, and who is a former Tesla and SolarCity executive. It can’t be “a place that you’re just going to run in and buy a Snickers,” Gore said.

While there can be a first-mover advantage for gas stations, some owners, like Blake Smith, founder of SQRL Holdings, a gas station and convenience store operator, are taking it slow. His company operates more than 150 convenience store gas station locations and offers electric charging in select locations in Florida. By contrast, the company hasn’t installed any EV charges in Arkansas, where it has more than 60 stations.

“I would never recoup my investment,” he said, adding that a move to all electric charging could be decades away. “We’re not flipping a switch to where gas vehicles are getting off the road and it will be EV-only.”

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